COSTA RICA
TRADE SUMMARY
In 2000, the U.S. trade deficit with Costa Rica was
$1.1 billion, a decrease of $477 million from the
U.S. trade deficit of $1.6 billion in 1999. U.S.
merchandise exports to Costa Rica were $2.4
billion, an increase of $66 million (2.8 percent)
from the level of U.S. exports to Costa Rica in
1999. Costa Rica was the United States’ 38th
largest export market in 2000. U.S. imports from
Costa Rica were $3.5 billion in 2000, a decrease
of $411 million (10.4 percent) from the level of
imports in 1999.
The stock of U.S. foreign direct investment (FDI)
in Costa Rica in 1999 amounted to $1.6 billion, a
decrease of 20.9 percent from the level of U.S.
FDI in 1998. U.S. FDI in Costa Rica is
concentrated largely in the wholesale and
manufacturing sectors.
IMPORT POLICIES
Costa Rica is a member of the Central American
Common Market (CACM), which also includes
Guatemala, El Salvador, Honduras, and
Nicaragua. There are no duties for products
traded among CACM members, with exceptions
including certain agricultural products. In 1995,
the members of the CACM agreed to reduce the
common external tariff (CET) to zero to 15
percent, with some exceptions, but allowed each
member to determine the timing of the reductions.
Costa Rica completed its agreed reductions with a
decree published on January 6, 2000.
Selective consumption (excise) taxes for many
imported (and domestic) products have been
reduced or eliminated. However, excise taxes,
ranging from 5 percent to 75 percent, apply to
about half of all products imported. Among the
highest taxed items are arms and munitions (75
percent), costume jewelry (50 percent), fireworks
(50 percent), whiskey (50 percent), new and used
vehicles (varies), and wine and beer (40 percent).
A 13 percent value-added tax is also applied on
most imports and local goods and services.
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The Government of Costa Rica agreed to
eliminate all import quotas in the Uruguay Round
negotiations. It also agreed to reduce its maximum
tariff rates over time. The tariff binding for 2001
is 48 percent on most goods, excluding selected
agricultural commodities, which are protected
with significantly higher tariffs. Examples of such
protection are dairy and poultry products, with
tariff bindings of 99.7 percent and 245 percent,
respectively, for 2001. Costa Rica began reducing
applied tariffs on dairy and poultry products in
1999. The maximum applied rates for these
products were lowered to 72 percent and 154
percent, respectively, on January 1, 2001.
Most applied tariffs on agricultural products range
from one to fifteen percent ad valorem. The
Government of Costa Rica reduced duties on
imported raw materials, bulk grains, and oilseeds
from five percent to one percent in July 1996.
Imported automobiles, both new and used, are
taxed relatively heavily. Under regulations in
effect since late 1998, total taxes on cars from the
latest four model years are 59 percent ad valorem,
while rates for older cars range from 71-85
percent, depending on age.
Costa Rica has a free trade agreement in effect
with Mexico and has agreements pending
ratification with the Dominican Republic and
Trinidad and Tobago. A free trade agreement
with Chile has been ratified by the Costa Rican
legislature but awaits Chilean ratification. Costa
Rica is currently negotiating free trade agreements
with Canada and Panama. Certain U.S. exports
such as deciduous fruit could be placed at a
disadvantage when these agreements enter into
force.
Non-tariff Measures
The Costa Rican Legislative Assembly approved
legislation implementing the Uruguay Round
Agreements in December 1994. The law
eliminate quantitative restrictions and
requirements for import licenses and permits for
goods such as pork and related by-products,
poultry, seeds, rices, wheat, corn (white and
yellow), beans sugar, sugar cane and related
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products, dairy products, and coffee. The import
permits in many cases have been replaced by
tariffs as a result of the Uruguay Round
negotiations.
Rica in part due to a lack of adequate laboratory
equipment and funds.
Importers of U.S. rice and onions have
occasionally experienced difficulty gaining entry
for their shipments, despite payment of the
maximum bound rate tariff. There have been
allegations that officials of the Ministry of
Agriculture have used excessively strict quality
standards or delayed issuance of standard
sanitary/phytosanitary documentation to assist
domestic farmers facing difficulties with low
world prices. The shipments have eventually been
allowed to enter, but the delays have led to lost
earnings by the shipments’ owners. Difficulties
with rice shipments revealed the existence of a
Costa Rican law that required rice mills to
purchase rough rice only from producers and not
from intermediaries. The Government has since
overturned that law, although problems remain
with respect to delays in processing of
sanitary/phytosanitary documentation. U.S.
industry estimates that it could increase rice
exports by $5-25 million if current barriers to rice
were removed.
Costa Rica’s government procurement system is
based on the Law of Administrative Contracting
(Law No. 7494), a reform to the Costa Rican
Financial Administration Law which came into
effect in May 1996. Government entities or
ministries with a regular annual budget of more
than 900 million colones ($2.84 million as of the
beginning of 2001) ordinarily must publish public
tenders in the official newspaper (La Gaceta) for
purchases over 45 million colones ($142,000).
These entities may make purchases between 6
million colones and 45 million colones ($19,000$142,000) through tenders circulated to suppliers
on pre-approved lists. Foreign firms may
participate in public tenders and be registered as
pre-approved suppliers. Costa Rica is not a
signatory of the WTO Agreement on Government
Procurement.
Costa Rican customs procedures have long been
complex and bureaucratic. The general customs
law passed in 1995 formalized reforms aimed at
streamlining customs procedures, and much of the
necessary processing is now accomplished
electronically. Also, Costa Rica has been
implementing the WTO Agreement on Customs
Valuation since the start of 2000. However, the
U.S. business community continues to press for
quicker and more streamlined processes.
STANDARDS, TESTING, LABELING AND
CERTIFICATION
Costa Rican law requires exclusive use of the
metric system, but in practice Costa Rican
officials do not challenge U.S. and European
commercial and product standards. The system of
standards is not uniformly implemented in Costa
GOVERNMENT PROCUREMENT
EXPORT SUBSIDIES
Incentives for non-traditional exports, including
the tax credit certificates (CATs) and tax holidays,
were phased out in 1999. Tax holidays are still
available for investors in free trade zones, unless
tax credits are available in an investor’s home
country for taxes paid in Costa Rica. However,
tax holidays are scheduled to expire in 2003 in
accordance with Costa Rica’s obligations under
the WTO Subsidies agreement.
INTELLECTUAL PROPERTY RIGHTS
PROTECTION
Costa Rica is a signatory of all major international
agreements and conventions on trademarks,
copyrights, and patent protection. Costa Rica
became a member of the World Intellectual
Property Organization (WIPO) in 1980. Costa
Rica’s National Assembly approved seven new
laws at the end of 1999 for the purposes of
bringing the country’s legal framework into
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COSTA RICA
compliance with the World Trade Organization’s
TRIPS Agreement. Legislation governing
enforcement of intellectual property rights and
establishing criminal penalties for commercialscale trademark and copyright violations was
passed in 2000. A report prepared by the
International Intellectual Property Alliance (IIPA)
estimates that copyright infringements in Costa
Rica of business software, motion pictures and
sound recordings cost U.S. firms $14.2 million in
2000. During 2000, Costa Rica was on the
Special 301 Watch List.
Copyrights
Costa Rican copyright law is generally adequate,
but not uniformly enforced. The copyright regime
was revised in 1994 to provide specific protection
for computer software and in 1999 to protect
integrated circuit designs. The National Assembly
ratified the WIPO Copyright Treaty and the
Performances and Phonograms Treaty at the end
of 1999. Piracy of satellite transmissions by the
domestic cable television industry has been
curtailed, but some apartment buildings and
hotels, particularly in areas not served by major
cable service providers, continue to engage in
satellite signal piracy. Piracy of video recording
and computer software is also widespread,
although some progress has been made in
reducing such practices. Video piracy has also
been reduced over the last few years. The IIPA
continues to believe that criminal sanctions and
enforcement actions are inadequate and fail to
deter intellectual property violators.
Patents
The Legislative Assembly ratified the Paris
Convention for the Protection of Industrial
Property in 1995. However, Costa Rican patent
law remained deficient in several key areas.
Patents were available for a non-extendable 12year term from the date of grant. In the case of
products deemed to be in the “public interest,”
such as pharmaceuticals, agricultural chemicals,
fertilizers, and food and beverage products, the
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term of protection was only one year from the date
of grant. Reforms to the new patent law, passed at
the end of 1999, are intended to bring Costa Rica
in line with its obligations in the WTO. The law,
as reformed, extends full twenty-year patent
protection terms for all inventions, including those
“in the public interest.”
Trademarks
Counterfeiting of well-known trademarks is
widespread. Legal recourse against these
practices in Costa Rica is available, but may
require protracted and costly litigation. Costa
Rica signed the Central American Convention for
the Protection of Trademarks in 1994. A protocol
amending the Convention to bring it into
compliance with the TRIPS Agreement was
ratified in late 1999. The Costa Rican Textiles
Chamber, representing trademark owners in the
garment industry, was instrumental in passage of
legislation in 2000 that established criminal
sanctions for commercial-scale trademark
violations.
SERVICES BARRIERS
State monopolies cover: insurance;
telecommunications; energy distribution;
petroleum distribution and marketing to the retail
level; and railroad transportation. In addition,
there are restrictions (such as Costa Rican
registration and long-term residency requirements)
on the participation of foreign companies in some
private sector activities, such as customs handling,
medical services, and other professions.
Wholesalers must have resided in Costa Rica for
10 years and have conducted business there for
three years.
In 1999, Costa Rica ratified its commitments
under the 1997 WTO Financial Services
Agreement and accepted the Fifth Protocol of the
GATS. Under this agreement, Costa Rica
committed to allow foreign financial service
providers to establish 100 percent owned bank
subsidiaries in Costa Rica to provide lending and
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deposit-taking services, leasing services, credit
card services, and financial information services.
Costa Rica made no commitments in the WTO for
the provision of securities trading, underwriting
services, or any type of insurance services.
resulted in the death of a U.S. citizen in late 1997.
The U.S. Government has urged the Costa Rican
Government to provide prompt, adequate and
effective compensation, to improve security, and
to protect property owners.
Financial reform legislation enacted in 1995
eliminated state-owned banks’ monopoly on
checking accounts and savings deposits of less
than 30 days and allowed private commercial
banks to access the Central Bank’s discount
window beginning in September 1996. To qualify
for the benefits of the law, however, private
commercial banks are required to lend between
10-17 percent of their short-term assets to stateowned commercial banks and/or to open branches
in rural areas of the country. This requirement is
being challenged in Costa Rican courts.
Costa Rica affords national treatment for foreign
investors who incorporate or otherwise establish
their business locally, and there are no restrictions
on the repatriation of investment assets or profits
in sectors open to foreign investment. The U.S.
and Costa Rican Governments have attempted to
negotiate a bilateral investment treaty, but
negotiations stalled at the beginning of 1997.
Foreign individuals wishing to participate in some
sectors may be discouraged by regulations
governing the practice of a profession. For
example, medical practitioners, lawyers, certified
public accountants, engineers, architects, teachers,
and other professionals must be members of an
officially recognized guild (colegio) which sets
residency, examination, and apprenticeship
requirements.
The Costa Rican constitution grants a monopoly
over the insurance sector to the National Insurance
Institute (INS). The INS also provides fire
department services and owns and manages
medical/rehabilitation clinics.
INVESTMENT BARRIERS
Costa Rica’s 1995 expropriation law (Law No.
7495) improved the protection of private property.
The law makes clear that expropriations are to
occur only after full advance payment is made, in
accordance with Article 45 of the Costa Rican
constitution. The law applies to Costa Ricans and
foreigners alike. Despite improvements in the
legal framework, several older cases remain
unresolved. Invasions of land by organized
squatters are not uncommon. One land invasion
State monopolies cover large electrical generation
plants and petroleum exploration and refining. An
electricity co-generation law enacted in 1996
allowed some private-sector participation in the
production of electricity, but not in its
transmission. This law has since been modified to
permit the private construction and operation of
plants under build-operate-transfer (BOT) and
build-lease-transfer (BLT) mechanisms, but the
operator must have at least 35 percent Costa Rican
equity. Legislative proposals to open the
electricity and telecommunications sectors to
foreign investment and competition were
abandoned in 2000 in the wake of large-scale
demonstrations against reform and a Supreme
Court ruling against specific legislation under
discussion.
It is difficult to quantify whether, or to what
extent, existing barriers to investment in protected
sectors impact U.S. exports. Protected sectors of
the Costa Rican market, including the
telecommunications and electricity sectors, have
historically been favorably disposed toward
purchasing U.S. supplies and equipment.
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